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Explainer – Mapping the Fed's Policy Path

Howard Schneider

(Reuters) – U.S. central bankers have signaled they may hike rates in July 12-15 Stabilize the interest rate at 5%-5 in June.18% after the meeting. They said their decision would depend on upcoming economic data. Here’s a guide to some data shaping the policy debate:

JOBS (Jul 7, next Aug 4): U.S. economy grows 180, Employment in June was lower than expected and part of a continued decline to levels seen in pre-pandemic years , when job growth averaged from 209 to approximately 30 per month, 2019. But it is worth noting that average annual wage growth at the Fed held at 4.4% for the third straight month, rather than slowing down as expected, and the unemployment rate edged down to 3.6%.

This evidence that continued strength in the labor market, even in the face of a gradual slowdown, could see the Fed raise rates again in July 18-26 Meeting.

Job Openings: (Posted July 6th, next posted August 1st ) Federal Reserve Chairman Jerome Powell closely monitors the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) for a key indicator of labor supply-demand imbalances — the number of job openings per applicant. During the pandemic, nearly every available worker has two jobs. The ratio fell and hit its lowest level since November at about 1.6 to 1 in May as Fed rate hikes slowed demand in the labor market.

Inflation (released in June 30): The price of the Fed’s preferred inflation indicator rose 3.8% year-on-year in May, since

, but underlying inflationary pressures remained in overdrive, with core personal consumption expenditures at 4.6%.

The lack of progress on the Fed’s 2% target makes it unlikely that Fed policymakers will feel comfortable delaying a July rate hike.

New data on the Consumer Price Index will be released in July . While headline indicators have fallen sharply since last year’s peak, services sector inflation remains persistently high.

Retail Sales (June release 15 ), next release July 18): Retail sales unexpectedly rose in May as demand continued to grow even for big-ticket items like cars. While analysts have seen some signs of weakness in areas such as rising credit delinquencies, the Fed has been watching key data for signs of a slowdown in spending it believes needs to cool. Still, a marked slowdown doesn’t appear to be imminent if June’s auto sales figures are any indication. Annualized sales of nearly 15 7 million vehicles last month were well above industry watchers’ expectations.

Bank data: Released every Thursday and Friday

At some point, the Fed wants credit to become more expensive and difficult to obtain. This is how rising policy rates affect economic activity. But the recent bank failures could not only put unnecessarily broader pressure on the sector, but could also lead to a sharper-than-expected credit crunch. Weekly data on bank lending to customers showed loan growth was slowing. Meanwhile, bank borrowing from the Fed remains elevated but relatively steady on a weekly basis.

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